Friday, March 20, 2015

An important story in today’s newspapers deals with former
trader Paul Robson who has been banned for life from the UK financial services
industry by the FCA following a conviction for fraud in America, the
regulator's first public action against a trader for manipulating Libor
submissions.

In 2014
Robson, who worked at Rabobank, pleaded guilty in a New York court in August
2015 to his part in a conspiracy to manipulate Rabobank’s Yen Libor submissions
to benefit trading positions.

As a
result, he has been banned for lacking ‘honesty and integrity'.

This ban
comes ahead of Robson's 2017 sentencing in the US and the FCA's proceedings
were stayed due to ongoing criminal proceedings since they issued Robson with a
warning notice in 2013.

FCA
acting director of enforcement and market oversight Georgina Philippou said: 'No
excuse can be made for Mr Robson’s behaviour, which was particularly serious.
He was the primary submitter of Yen Libor at Rabobank for a number of years and
experienced in the market.

'He knew
what he was doing was wrong. This ban reinforces our expectation that
individuals and firms take responsibility for ensuring market integrity and
reminds them of the consequences if they fall short of our standards.'

This
story is important for a number of issues.

Firstly,
it raises the vexed question of the lack of dynamic action by the FCA and the
SFO against a UK-registered individual for a particularly dishonest and grubby
criminal offence involving the criminal manipulation of the LIBOR benchmark.
Why was the criminal case left to the Americans?

Now, it
may be that the SFO had decided to let the case lie while they observed what
their US counterparts wanted to do about it. It would not be too far from
reality to observe that if there were US defendants involved in the conspiracy,
and the US prosecutors had taken the lead in the investigation, then the trial
might more properly be allowed to take place in New York.

It seems
this is probably what has happened, and Robson will later be sentenced by the New
York Courts in 2017, no doubt when other similar cases arising out of the same
circumstances have been finalised.

This case
does raise more issues however, issues which have to do with integrity and
moral transparency, and which underpin an argument for the need for a greater degree
of strategic leadership.

This
issue of strategic leadership was also amplified by the actions of former HSBC
boss, Lord Green, the former chief executive and chairman of HSBC, who has just
revealed his “dismay” and “deep regret” over the tax evasion row that has
engulfed the bank.

The
HSBC veteran admitted that management had made mistakes during his time at the
lender, which coincided with alleged moves by its Swiss private bank to help
wealthy clients hide billions of pounds in order to escape taxes in the
mid-2000s.

What
sheer bloody hypocrisy!

This
man, who refuses to answer any questions over what he knew and how he knew it
about the tax evasion scandal was a career banker. I have every expectation
that he knew all about Swiss banking methods and tax evasion issues. If he didn’t,
which I don’t for one second believe, then he was remarkably ill-informed, but
his career tells a different story.

In
January 2005, Green became Chairman of HSBC Bank plc, the group's UK clearing
bank subsidiary, and Group Executive Chairman in June 2006. In its July 2005
issue, Bloomberg Markets magazine reported that HSBC was allowing money
laundering by drug dealers and state sponsors of terrorism; the magazine
alleged that this had included a transfer of $100,000 in April 2000 to the Taliban
in Afghanistan which had subsequently resulted in a fine levied by the US
Treasury Department.

Green
denied the allegations, calling them “a singular and wholly irresponsible
attack on the bank’s international compliance procedures”. Subsequent
investigations however, confirmed that money laundering had taken place at the
bank for several years throughout Green's tenure as Chief Executive and
Chairman, chiefly for the Sinaloa Cartel. It is widely reported that Stephen Green
earned well over 25 million pounds per year at the time, although it is hard to
quantify the exact amount.

Green's
successor as the top of HSBC, Stuart Gulliver, said “between 2004 and 2010, our
anti-money laundering controls should have been stronger and more effective and
we failed to spot and deal with unacceptable behaviour”.

So what
did ‘Lord Green of See No Evil’ think his Swiss Bank was doing for UK clients,
selling cuckoo clocks?

For
this man to talk about setting high standards, is a travesty and an abuse of
the ordinary meaning of words. This was not leadership, it was a deliberate and
willing avoidance of the truth, and he needs to go and ponder the parable about
camels, rich men and the eyes of needles before he spouts any more hypocritical
tosh!

Edwin
Sutherland, the US criminologist tried to enunciate an explanation for such
behaviour among white collar workers, in his book ‘White Collar Crime’, in 1939.
Sutherland defined it as;

“...A
crime committed by a person of respectability and high social status in the
course of his occupation...“

In other
words, a crime committed by someone who would otherwise not be thought of as a
typical criminal type or a person likely to commit crimes.

In his
theory of “Differential Association”, Sutherland posited that criminal
behaviour is a result of a process of socialization, during which criminal
“definitions” (ideas) are not only transmitted culturally,but are actually learned through social
interactions with trusted intimate groups.

Learned
behaviour is neither invented, nor inherited. The skills and techniques
required for criminal activity are not innovations, and they are not
automatically obtained from birth.

Criminal
behaviour is learned. Just as one learns to prepare a meal, so too one learns
to cheat a client or manipulate a benchmark.

They are
acquired through a process of learning from others in the same milieu.

Sutherland
states that one learns criminal behaviour through social interaction and
communication with others in the same ‘trusted’ group.

This
communication-based discovery occurs during the learning process about criminal
activities. One may come to learn about bank crime through discussion with
others, but also by witnessing the responses of the others towards the
activity, such as maintaining a group silence about the practice, if questioned
by supervisors.

Most learning
of crime and deviance takes place in interaction with members of intimate,
personal groups, such as fellow employees in a department or on a trading desk.

The
greater implication of this proposition is that it locates trust at the
root of those social interactions which encourage deviance.

New
employees would be likely to first learn how to mis-sell products or manipulate
a benchmark from their close associates within the close group or team, rather
than from mere general acquaintances.

Sutherland’s
concept of learning identifies what is acquired through communication with
intimates that facilitates criminal activity.

Through
this learning process an individual gains not only the skills and techniques required
to commit the crime, but also what Sutherland called the “motives, drives,
rationalizations, and attitudes” that accompany the behaviour.

Not every
employee who learns, commits offences. Instead, Sutherland calls attention to a
subjective component which individuals also have to learn, or adopt, the
social, cultural and psychological attitudes that drive a violation of the law.

Such
rationalizations and attitudes also explain the common excuse for criminal
behaviour which is that it is warranted or deserved.

“There
are no laws against it”.

“Everyone
is doing it – it must be ok” What David Matza would later call ‘Techniques of
Neutralization”.

If what they do is not perceived by themselves, their sub-cultural peers
or professional colleagues to be criminal because they have jointly accepted
that the law does not apply to them in these circumstances, then regardless of
Parliamentary intention or definition, any attempt by legislators to provide
systems of regulatory control, particularly those which depend upon
self-regulation for their authoritative administration become futile.

This is
why there is such a need for strong moral leadership within the banking milieu!

If
employees learn that their colleagues are rewarded for cheating, stealing,
manipulating benchmarks or otherwise indulging in thinly disguised criminal
behaviour, the more likely they will be to indulge in the same dishonest conduct
themselves.

If
earning objectives are set so high that it means that employees will need to
cheat and steal to achieve those targets, then there should be no surprise if
that is what happens.

Once
management has instilled the idea that criminality is rewarded, while turning a
blind eye to the provenance of the revenues being driven, employees will adopt
these methods as a matter of course.

Remember,
criminal conduct is what Sutherland defined as a ‘learned process’, and being
rewarded for doing wrong is the fastest way to create an unstable and
dysfunctional workforce.

So, when
Paul Robson was engaging in his dishonest conduct, he was merely demonstrating
his teaching and demonstrating that he had learned well.

What on
earth would have possibly otherwise encouraged a man with a senior (and
presumably well-paid job) to engage in such blatant criminal conduct. He must
have known that what he was doing was dishonest, so why did he do it?

Clearly
he had observed too many examples of others getting away with similar behaviour
until such a time when it became unremarkable to him. However, he must also
have known that management would remain untroubled by his actions, as long as
he was making a profit!

Where
management fail to provide the necessary degree of example of good business
models and fair conduct, then their staff and direct reports will quickly learn
how to manipulate the working environment to their own benefit.

This is
why I suggest that senior directors of banks who conduct themselves like Lord
Green of ‘Hear no Evil’, fail to provide the necessary degree of leadership and
good example to their staff which will overcome the tendency to resort to
criminal conduct.

Banking
crime is not necessarily a foregone conclusion, nor does it need to be, but
until such time as bank Boards start demonstrating a far greater degree of
leadership and ethical suasion, and stop making pious excuses when it can be
amply demonstrated that they were failing to lead the enterprise in an
effective manner, cases such as that demonstrated by Paukl Robson will continue
to proliferate.

Monday, March 16, 2015

The way Swiss banking works means we all are forced to live
in a parallel tax universe. It becomes a scourge for countries trying to
organise fair taxation policies.

I have been following the interviews conducted by
Parliamentary Select Committees with senior officials from HSBC.

These events are great fun and they enable us to watch
MPs giving Stuart Gulliver a hard time, along with sundry other grey men and
women whom you would frankly have difficulty trusting to feed your cat while
you were away on holiday.

The difficulty with this process is that the Committees
never seem to resolve anything, and they leave the problem still wide open.

The witnesses are incredibly well briefed on what to say
and how to say it, while the Select Committee members, tend to bumble along,
asking wide open questions, each with their own agenda (apparently) and making
assumptions they probably have no right to make.

Much as I have enjoyed watching Margaret Hodge losing it
with Rona Fairhead, the HSBC non-executive director who earns in excess of half
a million pounds a year for presiding over, well I’m not sure what she does, at
the bank, Ms Hodge’s very righteous anger doesn’t do much more than allow the
rest of us a brief period of schadenfreude, while we watched this grossly
overpaid member of the Liberal Chatterati Establishment (she is also the Chair
of the BBC Trust) squirm in her well-tailored suit while Margaret Hodge
denounced her as untrustworthy, said she had lost any confidence in her, called
upon her to resign her role from the BBC, to avoid being sacked, and generally
trashed her reputation. Frankly, she would have a difficulty getting a job
running a whelk stall after this public dressing down.

Sadly, this is about all the Select Committee seem to
have been able to achieve, Chris Mears, another former HSBC Director came in
for the Hodge softening up process, learning that he too had lost any
confidence Ms Hodge might formerly have had in him!

The real problem with all this invective and reputation
destruction is that while it makes for great television, as a forensic process
of deep, insightful, investigative interviewing, it does nothing to help us pin
the blame on the right people, who were responsible for allowing HSBC to add
the words ‘Institutionalised Tax Evaders to the very rich and powerful’ to
their tarnished commercial escutcheon.

You see, the way the world’s tax evasion systems were
designed to work, anyone with a Swiss bank account could effectively hide his
money from the oversight of his homeland Revenue collectors, and there was
little the tax men could do about it.

The vast majority of countries used to work on the
principle that no country would assist to enforce the tax laws of another, and
the generalised fiction used to be that if X had abused his home tax laws, we
would not pursue him here to help recover money for his home country’s
exchequers.

Switzerland went a step further, and actively and knowingly
accepted the proceeds of foreign tax evasion. Ironically, this did not apply to
Swiss citizens and they were encouraged to pay all their taxes to their
relevant tax authorities, but foreign tax evasion would always be certain of a
warm welcome in Switzerland.

So a vast number of foreign banks have branches in
Switzerland. These are largely Swiss-registered entities, operating under the
home name, and would be subject to all the severe Swiss banking laws with
regard to secrecy, and confidentiality, as well as the strict requirement for
preventing any unauthorised person from having sight of the identities of the
beneficial clients of the bank.

If questioned, the foreign bank would say that they
assumed that any clients from their home country who had a Swiss bank account
would be fully aware of their responsibilities of reporting its existence to
their home revenue authorities, and they would claim they felt entitled to
assume that their clients were operating their accounts lawfully and within the
terms of the home revenue’s requirements.

So when HSBC operated HSBC Suisse, the company was
incorporated in 2001 and is headquartered in Geneva, Switzerland. HSBC Private
Bank (Suisse) SA operated as a subsidiary of HSBC Private Banking Holdings
(Suisse) SA.

It should be said right here that it was not a criminal
offence for any non-Swiss person to possess a bank account or savings account
in Switzerland, subject always to the proviso that its existence and contents
were disclosed to the tax authorities of the home country in which the
individual paid tax.

Simple really, but what on earth would be the point of
having such an account, with its high operating fees if you then go and
disclose it to your tax man. You might as well not have it in the first place.

However, and this needs to be emphasized, as far as the
Swiss authorities were concerned, the Swiss bank was doing nothing wrong in
allowing a non-Swiss individual to operate an account whose sole intention was
to defraud his home nation of tax, relying on Swiss bank secrecy to enable him
to get away with it.

What makes life even more difficult is that the senior
managers of the Swiss bank, particularly if they were non-Swiss citizens would
almost certainly not have been aware of the identities of the clients of the
bank. Under the strict confidentiality laws, it is not certain that the CEO,
particularly if he was a foreigner, would have known the identity of any
client, and he would have made very sure not to ask.

Where things began to get a tad murky was when the
European Savings Directive was introduced.

The original aim of the EUSD was that all countries would
freely disclose interest earned by a resident of an EU country in order to
ensure that the interest was fully declared in his country of residence. The
plan was that non-EU countries would also agree to disclose information about
the interest earned by EU residents. Many non-EU states and countries agreed to
introduce similar measures. These countries included most tax havens and
dependent territories of the EU countries. Countries such as the Isle of Man,
Jersey, Guernsey, Cayman Islands, Andorra, Turks & Caicos, British Virgin
Islands, Monaco, Switzerland, and many others thus agreed to implement similar
or transitional arrangements.

Some countries agreed to fully comply with the EU Savings
Directive by disclosing the names of their account holders and the interest
that they earned. However, several other EU and non-EU countries, such as
Switzerland, objected to the disclosure of account holders' names on the
grounds that such a disclosure would be contrary to their bank secrecy laws,
which prevent the disclosure of information about account holders, their
assets, and their interest or other income.

Accordingly, in order to guarantee privacy and bank secrecy
for EU residents who have accounts within certain territories such as
Switzerland, a withholding tax of 35% was to be levied on the interest earned
by those EU residents.

Then, to avoid the implications of such personal
investments being subject to the witholding tax. HSBC marketed a scheme which
offered clients the opportunity to switch their funds into a corporate account
maintained in a tax secrecy jurisdiction, such as Panama. The EUSD did not
extend to corporate funds, so if a client were to form such an additional layer
of secrecy, then he would avoid becoming subject to the implications of the
EUSD.

This begins to identify a very aggressive form of tax
avoidance or evasion as in this example.

Indeed, Stuart Gulliver was the beneficial owner of one
such scheme, although he insists that it was not done for tax-avoidance or even
evasion purposes, but simply to guarantee him complete confidentiality of his
financial affairs.

And I for one naturally believe him!

Nevertheless, the Swiss bank encouraged a large number of
clients to adopt this tax evasive measure.

But all the time, it is extremely unlikely that the
senior directors of the bank would have known the identities of the clients.
They would have relied on the discretion of the respective account managers, as
well as maintaining the full operational effectiveness of their own anti-money
laundering provisions. The Swiss, ironically, have some of the most effective
AML laws in the world, and they work and the Swiss enforce them. The only
problem is that the information they possess can not be shared with other
agencies, except under very specific criminal investigations, but specifically
not when it comes to tax matters.

So when Stuart Gulliver and his colleagues were saying
that they did not know who was banking with HSBC Suisse, they were in all
probability telling the entire unvarnished truth, because they would not have
known.

Indeed, Ms Fairhead not unreasonably made the point that
when the directors of the bank wanted to satisfy themselves that all was in
order, they had to rely on the word of the staff and the outcome of investigations
by an external technical consultancy firm. All they would have been able to do
was to confirm that the Swiss Bank had good ant-money laundering practices and
procedures and that they were working effectively.

This would not have alleviated the concern of client
identity, and to make matters more difficult, the directors would almost
certainly have assumed or surmised that one of the purposes of running such an
account was for tax evasion purposes. So it suited their purposes not to know
the identity of the clients, or indeed anything about them at all, because they
might otherwise have been required to start making disclosures under the Money
Laundering provisions.

So we find ourselves caught in a Catch 22 situation. Had
they been aware of the identity of any UK citizens, and possibly any other
citizen of any country who was using these evasive schemes; and the information
came to them through their office or employment; they could do very little
other than suspect that the schemes were being used for tax evasion purposes,
and they should have made disclosures to the relevant law enforcement
aiuthority in the UK.

So, while It is illegal for a UK domiciled tax payer to
defraud HMRC by possessing an undisclosed Swiss bank account, and using that
account to disguise sums which would ordinarily become subject to tax.

The same situation is not illegal in Switzerland.

So, until a situation such as we now observe arises,
whereby the identities of foreign nationals who possess Swiss bank accounts,
and who have not made relevant disclosures comes to light, there is very little
the UK authorities can do, because they cannot identify who is defrauding the
Revenue, and the Swiss will not tell him.

Now, with the knowledge of the identities of the tax
evaders, HMRC can begin oroceedings against all those persons who made use of
the facilities to defraud the UK Revenue.

Further, they can now bring proceedings against relevant
persons inside HSBC, if it can be shown that British employees of the Swiss
entity came to the UK and solicited UK clients to make use of the new tax
evasive facilities, and they can be prosecuted for various offences of
incitement, or conspiracy to commit the relevant offences.

Then there are the offences under the Money Laundering
Regulations of money laundering. Albeit the information is now possessed
through these disclosures, it can now be clearly shown that HSBC were helping
UK citizens to evade tax, and they are thus likely to be charged with Money
Laundering.

These issues are all a matter for the Criminal Justice
Authorities.

It is of course massively hypocritical of HSBC to now
apologise for such actions, calling them ‘unacceptable’. They must have known
or at the least suspected that any UK citizen who had a Swiss bank account,
would be tempted to use it to evade UK taxes, albeit they could not prove at
the time, the identity of their own clients, because their Swiss colleagues
would have been prevented from telling them.

Of course, half an ounce of common sense, and a flair for
investigation would have demonstrated that the profits the Swiss bank was
making far outstripped profits in other bank sectors, which might at least have
caused them to wonder ‘why’?

However, without the actions of the French insider who
downloaded the relevant records and published them to law enforcement
authorities, we would still be in the dark as to the dubious activities of HSBC
Suisse.

However, this will always remain the conundrum when Swiss
registered banks offer banking services to persons from outside their domicile,
and no amount of well-intentioned shouting and insults from Select Committees,
will alter that fact.

Tuesday, March 10, 2015

In a blog-piece I wrote not so long ago, I challenged Britain’s
Banks to demonstrate that they could continue to return the levels of
profitability they had hitherto made, but to do it by acting ethically and
honestly and not through a series of criminal offences! My challenge to them
was that I did not believe they could do it!

Some years ago, a good friend of mine rang me up to tell
me he was going to work as a senior MLRO for a bank in the Middle East.

‘Nice jpackage’. I said, ‘but I thought you had a good
job with Barclays?’

‘I had to leave them’ he said. ‘I was wondering all the
time when I might be arrested, and I wanted to be able to sleep at nights’!

As a senior and experienced compliance officer at
Barclays Capital, he was caught in the middle of the heady days of the Diamond
regime, but he was still trying his best to make sure that the Money Laundering
Regulations were being respected and applied. He wanted to make sure that the
KYC provisions were respected, and if or when he was not satisfied that the
necessary due diligence about the identity of the beneficial owner had been
properly achieved, he would require more investigation, or further
documentation before allowing the funds to be traded.

He was particularly specific about PEPs and insisted that
the relevant enquiries were satisfactorily completed.

If he was not happy about the provenance of the funds he
would discuss the client with the account managers to see if they could acquire
more clarification of the source of the deposits, but if this could not be
achieved, he would advise the account manager of his intention to make a
Suspicious Activity Disclosure to the relevant law enforcement agency.

He was a tough, experienced compliance professional, and
his insistence on ensuring that the laws dealing with Money Laundering were
obeyed, led to his having to endure screaming arguments, torrents of abuse from
traders and account managers, ostracism from the relevant senior managers who
accused him of not being part of the team, and a working life which was one
long series of battles.

Another man (or woman) with less moral courage, would
have long since sought the line of least resistance and would have stopped
fighting the other members of the team, and just signed off whenever required.

He worked closely with the police when they investigated
STRs that were made and he sought to make sure that the relationship between
the bank and the law enforcement agencies was respected, and most importantly,
that as far as he could, he sought to protect the reputation of his employing
institution. He should have saved his breath, because no-one else around him
cared and instead, confronted him at every turn.

All this did was to make his life a very unhappy one, and
in the end, sooner than continue to face the daily grind of having to explain
why money of deeply suspicious criminal origin was not welcome, he chose to
leave and go elsewhere.

I have long suspected that the UK Investment Banking arm
was very closely linked with the fortunes in dirty money that daily found its
way into the City of London. Indeed, I believe that the only thing that helped
to provide liquidity to some UK banks in the really dark days of the credit
crisis, was the amount of drug money from dubious foreign sources sloshing
around the City banking sector. Not for nothing could it be said that the UK
banking sector was truly drug dependent!

Consider the implications.

The City of London is the most effective and connected
financial market in the world, bar none. It connects effortlessly with the
global offshore sector, many of whose practitioners are former British
protectorates or in some way connected with GB.

Investment banking has a varying number of technical
names to describe its professional function, but the one I like best is
‘gambling’!

I know there are a large number of people out there who
will accuse me of ignoring vast swathes of banking activity which are
undertaken for legitimate reasons, but I will try and show why those functions
are more properly the function of more traditional ‘merchant banking’,
financial advisory work, as opposed to ‘investment banking’.

For
example, when a big corporation asks for the bank's help if it wants to borrow
money in the bond markets, or float itself on the stock market, or buy up
another company. In this capacity, the investment bank acts as an impartial
adviser - like a solicitor or an accountant - using its expertise to help its
client in return for a fee.

This
group of activities was undertaken by traditional British Merchant Banks for
many years and with a great degree of success. But it never generated the level
of fees and revenues that were generated by the investment banks.

This is
what happens when investment banks also do something else quite different – dealing
directly in financial markets for their own account. Then an investment bank's
"markets" division makes money by buying financial assets from one
client, and then selling them to another - often with a hefty mark-up.

But it
was the capital markets whizz-kids who were behind the last decade's boom in
"derivatives" – the complex contracts that allowed clients to
speculate on financial markets, by reversing the polarity of the traditional
use of the risk-hedging function of derivatives and using them to amplify risk
so as to earn inflated profits, which gave the ‘investment’ arm of these
institutions the belief that significant levels of profitability were a
foregone conclusion.

Once the
taste for dealing on their own behalf, or proprietary trading became a profit
centre in its own right, then the investment banks started to trespass into
areas where the ordinary rules of business were quickly jettisoned.

Whether
it was in straight-forward derivative trading for the bank’s own book, or
dealing in options strategies, trading baskets of stocks against put options
designed to be unwound at a strategic moment to enhance profitability; market
making in shares, manipulating benchmark products, dealing in Foreign Exchange,
you name it, once that stage had been reached, then the potential for
down-right criminality became the operating norm!

In a
blog-piece I published entitled ‘Behind every great fortune there is a great
crime’, I wrote;

“You only have to look at the activities of
all the major banks in the perpetration of the institutionalised level of PPI
fraud which has lasted for many years, to understand the truth of this
allegation. The monies made in the pursuit of profits and the ‘grabbing of the
biggest share of the customer’s wallet’ which so identified the PPI fraud era,
has enriched many bankers a hundredfold.

“...Add
into this the other levels of criminal fraud perpetrated against clients, the
deliberate lying about the valuations of debt-secured securities followed by
the fraudulent foreclosure on loans, the false enrichment of bankers at the
expense of client’s criminally forced out of their contractual obligations, and
you begin to see a positive policy of criminal activity being widely
perpetrated.

“...Then
you start to look at the level of foreign money laundering, sanctions busting
and other breaches of anti-terror controls being imposed by Governments, many
if not most of which were routinely ignored by the banks. HSBC led the way with
their billions of dollars recovered from their money washing activities on
behalf of the Mexican Drug Cartels.

“...Libor,
and Forex manipulations are among the more recent exposees, and we have
absolutely no way of knowing how much criminal money has been recovered from
these dishonest adventures.

“...For
these, and for other reasons, I assert that the level of organised criminality
is so widespread in the banking galere that it is impossible to calculate the
amount of money they have created for themselves, and which has been paid to
them in the form of bonuses.

While their basic salaries may remained relatively
modest, they have more than made up for the wealth they have absorbed through
other payment mal-practices, as well as tax avoidance methods.

“...I
lived through the era of change as a detective at the New Scotland Yard Fraud
Squad, and I watched with mounting irritation and bemusement while perfectly
proper cases we should have been investigating were undermined by Government lawyers,
and later, as a regulator, I observed the spineless kow-towing of the
regulatory regime towards those who were facilitating the movement of the
growing levels of criminal money being slushed through the UK financial sector.

“...I
believe that it is now too late to put the genie back into the bottle, we must
live with the fact that the City of London (has been) and is run by a gang of
organised criminals who make Al Capone look positively benign!

“...Without
their intervention, as an integral component in the onward transmission of the
billions (if not trillions) of foreign dirty money which comes to London, I
seriously wonder how UK plc would survive if we had to run our affairs lawfully
and properly, I am not sure we could do it...”

Well,
imagine my great surprise when I read the Sunday Times this week-end and saw
the story “...Who did you think you were kidding Mr Banker...”

The piece was sub-titled “...Barclays
and RBS have reined in their ambitions to be global players in investment
banking. Will the City regret it..?”

Quoting from the article;

“...Now, Barclays is in
retreat. Anthony Jenkins, Barclays boss, has already slashed the size of the
Investment Bank, and last week, professed he had limited patience with the
rest.

At Royal bank of Scotland...the
flight is full blown. Its giant investment bank will shrink by two thirds over
the next three years. By the end of it, tens of thousands of pin-striped
warriors will have been scythed down.

“...Due to the damage done by
the credit crisis, however, when over-ambitious and greedy bankers cost
tax-payers billions, the Industry is without friends. Britain is saying goodbye
to the commanding heights of investment banking and- rightly or not – good riddance...”

The authors are not like me.
They do not go the full 9 yards and identify the reasons for the wholesale
retreat from what was a highpoint of British Banking, but their message is still
clear.

Well, I have no such
reservations. It is, as I challenged the bankers before, show us, prove to us
that you can continue to make the scale of inflated profits and pay the obscene
level of bonuses you have traditionally paid, but by doing so honestly and
without committing criminal offences.

Demonstrate to us that you
were making all this money because of the so-called highly qualified skills you
boasted about so assiduously and for which you had to pay such high salaries.

Remind us of the
rocket-science brains your dealers and traders are said to possess to enable to
to make all this money, so that we can justify to ourselves the fact that the rest
of us are unworthy to deserve similar salaries and bonuses.

And the simple fact is, they
can’t. I never thought they could and now, they have admitted it!

Barclays and RBS, two of the
most aggressive and highest risk-taking institutions in the business are now
openly admitting that they cannot make these returns using the new,
conventional, hopefully ethical, integrity-driven banking regime that their new
CEO’s are seeking to incorporate.

Banks don’t give up highly
profitable business centres for no reason. These banks have discovered what
most of us outside the industry have known for a long time, and that is the
business model they used hitherto was one more akin to the business methods of Mafiosi,
or organised criminals.

Now, using the newly adopted
methods which, we are told, incorporate greater honesty, accountability and
integrity, the banks are discovering that the traditional profits are not
available any more.

We should be pleased that
such a series of reforms is taking place, but not too quickly! Let us remind
ourselves that London is and remains still, the leading magnet for the world’s
funny money. As the Sunday Times article points out;

“...Whether they are UK-owned
investment banks or not, is not the issue. The question is whether investment
banking is taking place in London...in terms of London being attractive as a
location, it remains strong..!”

London will continue to be
attractive to the world’s crooks, oligarchs, dictators and other corrupting
influences for a long time to come!

About Me

Having spent my career dealing with financial crime, both as a Met detective and as a legal consultant, I now spend my time working with financial institutions advising them on the best way to provide compliance with the plethora of conflicting regulations and laws designed to prevent and forestall money laundering - whatever that might be! This blog aims to provide a venue for discussion on these and aligned issues, because most of these subjects are so surrounded by disinformation and downright intellectual dishonesty, an alternative mouthpiece is predicated. Please share your views with what is published here from time to time!